Gas prices stable, barring surprises

Sunday

After running up every day for nearly two straight months, gasoline prices fell this past week -- as they typically do a little before or after the Fourth of July holiday.

After running up every day for nearly two straight months, gasoline prices fell this past week -- as they typically do a little before or after the Fourth of July holiday.

With the economy weak, analysts say prices should remain stable for the rest of the summer, barring a major hurricane, geopolitical events, a collapse in the dollar or some other development that could push oil prices higher.

Some questions and answers about what to watch for with gas prices in the coming months:

Q: Are we sure prices at the pump are done going up?

A: Since gas prices peaked at $2.693 a gallon on June 21 -- after going up for 54 straight days -- they had fallen 3.5 cents to $2.658 a gallon on Friday, according to auto club AAA.

Prices tend to climb throughout the spring as refineries shut down for maintenance -- reducing the supply of gas -- and switch production to summer blends of gasoline that are more expensive.

That happened this year, as usual. But now, refiners are operating at a higher capacity than they were this spring, pushing gasoline production up, said Phil Flynn of Alaron Trading Corp. At the same time, there are ample supplies of crude around the world and consumption remains low.

Put this all together, and there's plenty of supply to meet the world's demand, at least at the moment, and that should help keep prices stable.

Q: I would think demand would push gas prices up through the summer; don't we use more gasoline in July and August than June, given the long holiday weekend and more families going on vacation?

A: Gasoline consumption over the past 12 years typically has been higher in July and August than in June, but not much, according to Tom Kloza, publisher and chief oil analyst with Oil Price Information Service. With the exception of 2001, when consumption was up 3.4 percent from June to July and August, demand usually is up no more than 1 percentage point or so during that stretch of the summer, and some years it has even gone down.

Q: Shouldn't we be using more gas this summer, considering that prices are so much cheaper than a year ago?

A: That would make sense, but the recession and worries about unemployment are keeping many families home over the long holiday weekend. AAA said this week that it expects 37.1 million travelers to take a trip of 50 miles or more from home this year over the July Fourth holiday, a decrease of 1.9 percent from last year.

Q: Why do these facts not bring me any comfort?

A: Well, they shouldn't. Oil markets have been more topsy-turvy in the past two years than at any other time most analysts can remember, going back to the 1970s. Even with the U.S. embroiled in the longest recession since World War II, oil prices have more than doubled this year and gas prices have skyrocketed since hitting $1.61 a gallon on New Year's Eve.

Part of the problem is that the value of oil, to some extent, has little to do with the supply-and-demand theories we learned about in school.

It would seem that crude prices would remain low because demand is so soft. But crude is priced in U.S. currency and a lot of money has flooded into the market, with big investors putting money into oil as a hedge against inflation. The weaker dollar -- not strong demand -- has helped drive oil prices higher.

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